What is it about?
This study considers an inventory control system meeting uncertain demand in continuous time. The goal is to use the stochastic optimal control principle to completely solve a production planning model for the demand rate. A stochastic optimal control problem is formulated and analyzed in which the stochastic differential equations of a type known as Ito’s equations are considered which are perturbed by a Markov diffusion process. The existence of a complete solution to the associated HJB equation is established and the optimal policy is characterized. Numerical examples and solutions of this optimal control model are then presented.
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Why is it important?
This study focuses on stochastic optimal control problems related to demand management and production control decisions for a single product under capacity limitations and demand uncertainties. Other studies have the drawback of considering a pre-determined policy that is not guaranteed to be optimal.
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This page is a summary of: Extended optimal stochastic production control model with application to economics, Journal of Intelligent & Fuzzy Systems, February 2017, IOS Press,
DOI: 10.3233/jifs-16065.
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